Slowing Inflation Gives The Fed Some Room to Act
Up)
Ben Bernanke and the Federal Reserve have something to smile about this holiday season... slowing inflation.
Lower inflation numbers in the U.S. may provide the Federal Reserve with the cover needed for additional easing measures in 2012, the Wall Street Journal's Jon Hilsenrath reported Tuesday.
Look at commodity prices and the slowdown is clear to see, Hilsenrath notes. Copper is down 21 percent form last year, cotton is down 45 percent and natural gas continues to fall.
Now the slowdown in inflation is being seen in broader consumer price numbers. The Commerce Department's measure of consumer prices, the Federal Reserves' preferred gauge, was 2.5 percent in November. This is down from 2.7 percent in October and 2.9 percent in September. Excluding the volatile food and energy sectors, the number was just 1.7 percent.
Although signs of slowing inflation are being seen, companies aren't getting too comfortable. Deere (NYSE: DE) recently warned while raw-materials costs are down from their peaks, they are still up $500 million from 2012. La-Z-Boy (NYSE: LZB) told analysts earlier this month that while there may be some abatement in costs, the company's costs are still up sharply from last year.
Even Fed hawks like Richard Fisher, president of the Federal Reserve Bank of Dallas, recently indicated he isn't too worried about rising prices at this point.
With slowing inflation and a still lagging economy, the Fed could implement new measures to spur growth. Two ideas being considered: keep short-term interest rates near zero for even longer than the "mid-2013" date, and/or restart the bond buying program.
It seems comments made by Bernanke earlier this year which labeled inflation as "transitory" are proving to be accurate. Now the question is if the Fed has the tools in their arsenal to get the economy growing at an acceptable rate again.
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Lower inflation numbers in the U.S. may provide the Federal Reserve with the cover needed for additional easing measures in 2012, the Wall Street Journal's Jon Hilsenrath reported Tuesday.
Look at commodity prices and the slowdown is clear to see, Hilsenrath notes. Copper is down 21 percent form last year, cotton is down 45 percent and natural gas continues to fall.
Now the slowdown in inflation is being seen in broader consumer price numbers. The Commerce Department's measure of consumer prices, the Federal Reserves' preferred gauge, was 2.5 percent in November. This is down from 2.7 percent in October and 2.9 percent in September. Excluding the volatile food and energy sectors, the number was just 1.7 percent.
Although signs of slowing inflation are being seen, companies aren't getting too comfortable. Deere (NYSE: DE) recently warned while raw-materials costs are down from their peaks, they are still up $500 million from 2012. La-Z-Boy (NYSE: LZB) told analysts earlier this month that while there may be some abatement in costs, the company's costs are still up sharply from last year.
Even Fed hawks like Richard Fisher, president of the Federal Reserve Bank of Dallas, recently indicated he isn't too worried about rising prices at this point.
With slowing inflation and a still lagging economy, the Fed could implement new measures to spur growth. Two ideas being considered: keep short-term interest rates near zero for even longer than the "mid-2013" date, and/or restart the bond buying program.
It seems comments made by Bernanke earlier this year which labeled inflation as "transitory" are proving to be accurate. Now the question is if the Fed has the tools in their arsenal to get the economy growing at an acceptable rate again.
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